MBS MID-DAY: Weaker After Greece News, But Holding Ground
As seen in the recap of live alerts below, this morning's gains for MBS and Treasuries arrive on the heels of data that normally can't be counted on for the amount of market movement it seems to have created. The 10am New Home Sales data looks like it mattered to domestic markets, but there's no question that other factors are in play, including rising oil prices and what had been an ongoing rally in European bond markets. 10yr yields look to have bottomed around 2.21 and Fannie 3.5 MBS topped out at 102-19. At this point we're just hoping for volatility to stay at bay into the afternoon and hang on to the moderate level of gains that began the day.
After Greece announced that the remaining "international law" bondholders would get an extension for the private sector bond swap, through April 4th, risk markets took a positive turn with stocks surging and bond markets weakening. But Treasuries weren't interested in chasing stocks too much higher and held onto a supportive ceiling at a pivot point in the mid 2.24's. Fannie 3.5's bounced at 102-10 and currently sit at 102-12. The rather precipitous drop from earlier highs prompted some lenders to reprice for the worse, but risks are abating now.
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Pricing as of 1:23 PM EST |
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We weren't especially convinced we'd see any positive reprices earlier and indeed got only one. Similarly, we're not now expecting a flood of negative reprices, but we are sensitive the a 6/32nds swing in prices for any lenders who priced between 10:15 and 10:45am.
In terms of gauging the broader shifts, 10yr yields are at an important pivot point here in the 2.24's. This could turn out to be an oversimplification, but it looks like if 10's can hold a pivot at 2.244, then MBS will be content to hold their ground as well, minimizing the already relatively small reprice risk. Fannie 3.5's are still 6 ticks improved on the day at 102-12.
to recap: we'd keep an eye on 2.244 in 10's and 102-11 in Fannie 3.5's as pivot points. If MBS are moving lower through 102-11, reprice risk is increasing.
Technical levels were on the edge. This data gave markets a gentle nudge, was joined by spiking oil prices at the same time, and some snowballing has ensued, both in terms of selling stocks and buying Treasuries. S&P's are off 8 point in 10 minutes... pretty significant and 10yr yields are down to 2.2156. Lagging the rally are our beloved MBS, up only 10 ticks at 102-17, and wanting to see some more stability in benchmarks before buying into this relatively significant notch lower in the trading range.
Even so, some of the characteristically early-to-act lenders would soon be considering positive reprices if current levels hold or are improved upon.
*down 1.6 pct vs jan down 5.4 pct
Sales of new single-family houses in February 2012 were at a seasonally adjusted annual rate of 313,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.6 percent (±23.9%)* below the revised January rate of 318,000, but is 11.4 percent (±17.8%)* above the February 2011 estimate of 281,000.
The median sales price of new houses sold in February 2012 was $233,700; the average sales price was $267,700. The seasonally adjusted estimate of new houses for sale at the end of February was 150,000. This represents a supply of 5.8 months at the current sales rate.
We want to believe that 10's can hold under 2.26 for the rest of the day, but we'll likely continue to be skeptical until this new potential reality has more time to confirm. In a way, entertaining how much of a rally bond markets might have is rather inconsequential for the lock/float outlook as we don't have to worry about negative reprices until/unless things turn around and head the other way after rate sheets are out.
MBS, for their part, are also having a bit of a problem trusting the rally in benchmarks, only up to 102-13 at the moment whereas yesterday's trading range relative to 10yr trading range would have Fannie 3.5's well over 102-16. In other words, we've seen a bit of widening, both yesterday and this morning.